What’s Missing from Your Net Worth?

There are a few common items that need to be included on a net worth statement but typically get glossed over or excluded by most.

Be mindful of these seven common assets and debts most people fail to consider and report on:

1. Cars and other motor vehicles

Consider your cars, motorcycles, boats, or any motorized vehicle that you own. Understandably, most people exclude it from their net worth because it is a depreciating asset, unless it is a collectible. However, the car or vehicle has a value to it that you would receive cash for if you were to sell it. Thus, it should be under the “Other” category on your net worth statement.

2. Collectibles

This may include coins, comic books, Star Wars action figures, artwork and any other collector’s items. Some view their collection as merely a hobby and do not consider it “serious” enough to be part of their worth. However, if the total value of the collection totals more than $2,000, then it is worth including in your net worth.

In one instance, I was working with a client who had over 50 pairs of Michael Jordan-brand sneakers totaling about $17,000. Originally, he thought of his collection as just a fun hobby for his own personal amusement, but after becoming more educated on what a notable value for collectibles entails, we included it in his net worth statement.

3. Jewelry

If you are buying insurance on any jewelry or collection of jewelry, it needs to be included because of its value. A common example is that most married couples only include their engagement rings in their statement but forget to include their wedding bands.

4. Cash value on life insurance

If you own a permanent life insurance policy, such as whole life or universal life, then more than likely it will have cash value. One of the greatest advantages of owning a permanent life insurance policy versus a term policy is the potential to build up your cash value within the policy. Although life insurance is not a vehicle for savings, a permanent life insurance policy does have this cash value feature in which a portion of your paid premiums are “set aside” within the policy and earn interest. Term policies do not have this cash value feature.

5. Taxes and liens

If you failed to pay taxes and the IRS or state puts a lien, or a right to hold possession of property until the debt is paid, on any asset, it needs to be included in your net worth under the “Debt/Liabilities” category because you owe money to an entity. The last creditor you want to upset or have on your back is the government.

6. Hospital bills

This is another creditor that people often forget to include. You can call the hospital’s billing department or collections agency to request a monthly payment plan or lower your monthly payments and extend your term. Regardless, this needs to be included in the “Debt/Liabilities” category of your net worth statement.

7. Student loans

This would seem like an obvious one to include, but some people think, “This is something I will pay back over my lifetime, so why include it?” Believe it or not, I hear this complaint all the time.

Currently, the average student loan interest rate is 6.8% nationally, while the highest interest you can potentially earn in a savings account in this type of market is around 1.0%. By not taking your student loans seriously and paying them off, your money is getting eaten up by 5.2% each year.

If you question whether something should be included in your net worth, ask yourself:

“If I needed to pay for groceries and feed myself but had to sell everything I own and pay off all my debt first, will I be able to?”

It sounds silly, but it puts things into perspective of how you should value what you have or owe.

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This data is for informational purposes only and Capital Benchmark Partners, LLC ("CBP") is not affiliated with any of the businesses mentioned nor endorses them. CBP is not endorsed by any third party entities for their inclusion in this article. Past performance is not a guarantee of future results. The information contained herein has been obtained from sources believed to be reliable but the accuracy of the information cannot be guaranteed.